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Given the increasing hype about the potential for blockchain technology to revolutionize a wide variety of industries, the Ontario Securities Commission (OSC) is cautioning businesses that use distributed ledger technology (DLT), such as blockchain, need to consider whether they’re subject to securities law requirements.

For example, products, or other assets, that are tracked and traded as part of a distributed ledger “may be securities, even if they do not represent shares of a company or ownership of an entity,” the OSC states in a notice released on Wednesday.

As a result, the OSC says that certain uses of blockchain technology may trigger registration requirements, or the obligation to file a prospectus.

“Any business that is operating or planning to operate a DLT-based venture should consider the different types of offerings that involve securities within the meaning of the Ontario Securities Act; the types of trading activities that will occur; and whether registration as a dealer, adviser and/or investment fund manager is required,” the OSC says.

Companies that are unsure about whether securities law requirements apply to their blockchain-based activities should contact the OSC’s fintech team, OSC LaunchPad, the regulator recommends.

“Many uses of distributed ledger technologies have the potential to increase transparency and efficiencies in our capital markets, and we are keen to support this type of innovation,” says Pat Chaukos, chief of OSC LaunchPad, in a statement. “Because this is a novel area, businesses may not be aware that some uses of this technology could trigger securities law requirements. We encourage these businesses to speak with us about securities law and investor protection requirements that may apply.”

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